Ukraine has caused Hungary an energy crisis without Druzhba, – Politico

Sky-high prices and electricity shortages could hit Hungary within weeks.

Hungary is trying to avoid power outages and fuel shortages after Ukraine imposed a partial ban on the transit of Russian oil through its territory, Politico reports .

It is noted that in this way Ukraine is trying to suppress a key source of income for the Kremlin’s military coffers. But the move raises concerns about a supply shortage in Budapest, which depends on Russian oil imports by 70%, half of which comes from Lukoil.

“The Ukrainian measures could create a difficult situation,” said Ilona Gizinska, an expert at the Hungarian Centre for Eastern Studies. She added that Hungarians could face sky-high energy prices and electricity shortages in just a few weeks if no solution is found.

According to the Center for Research on Energy and Clean Air, in April of this year alone, Hungary spent almost a quarter of a billion euros on Russian oil and gas.

Budapest’s top diplomat Peter Szijjarto said that talks on finding alternative supplies of Russian oil had begun at a meeting with Russian Foreign Minister Sergei Lavrov: “There is a new legal situation in Ukraine now, on the basis of which Lukoil is not yet making deliveries to Hungary. We are currently working on a legal solution… because Russian oil is important from the point of view of our energy security,” he said.

The ban comes amid worsening tensions between Kyiv and Budapest, the journalists said. Ukrainian President Volodymyr Zelensky criticized Hungarian Prime Minister Viktor Orban this week for meeting with Vladimir Putin on a self-proclaimed “peace mission.” Budapest has also been persistent in holding back arms supplies from Kyiv.

Eastern Feud

Following Russia’s full-scale invasion of Ukraine, the EU imposed an embargo on Russian oil imports entering the bloc by sea. But the ban did not apply to pipeline shipments, including those coming through the Druzhba pipeline to Hungary, Slovakia and the Czech Republic. Those countries were given time to find alternative sources of supply.

Ukrainian MP Inna Sovsun said Kyiv had taken matters into its own hands: “We have been waiting for more than two years for the EU, the G7 to impose real sanctions on Russian [pipeline] oil,” she said, noting that the pipeline still carries 200,000 barrels of crude a day.

Given that Moscow earned $180 billion from oil exports last year, “it’s basically absurd to allow them to make that money by transporting that oil through Ukraine if that money is then used to kill us,” Sovsun added.

She also hinted at a secondary goal of the ban: to reverse Hungary’s opposition to arms supplies to Ukraine and Kyiv’s accession to the EU: “We have tried all the diplomatic solutions, but they have not worked. So it seems that we must find some other approaches to how to communicate with them,” she said.

Hungary is not alone in being hit by sanctions. Slovakia’s largest oil refiner, Slovnaft, buys oil from Lukoil. But a spokesperson for the country’s Economy Ministry told Politico that the firm has found an alternative, and for now “supplies of Russian oil to Slovakia have not been stopped.”

At the same time, the sanctions that force the operator of the Kyiv pipeline, Ukrtransnafta, to reject applications to transport contract oil with Lukoil via Druzhba do not yet affect other Russian oil companies. Rosneft and Tatneft continue to transport crude oil through Ukrainian territory.

That’s partly because the pipeline continues to transport non-Russian oil from Kazakhstan to Germany, said Elena Lapenko, a Ukrainian energy security expert at the DiXi Group think tank. But following Lukoil, “sanctions are coming against other companies that produce and export Russian oil,” she predicted.

Hungary must act quickly

“Any prolonged supply disruption will force regional refiners to use their stockpiles, draw them down and in the meantime seek some kind of diplomatic resolution to the problem,” said Victor Katona, lead crude oil analyst at exploration company Kpler.

Budapest can now negotiate higher imports from Rosneft or increase supplies from Croatia via the Adria pipeline. Hungary can also release some of its strategic emergency reserves, which will hold enough oil for 90 days.

Lukoil bans oil supplies via Ukraine

It is worth noting that in June 2024, Kyiv imposed sanctions that block the transit of pipeline oil from Lukoil, Moscow’s largest private company, to Central Europe. This partially lifted the exemption from EU sanctions on Russian oil supplies via pipelines.

Hungarian Foreign Minister Peter Szijjarto has called Ukraine’s halt to transit of Russian Lukoil oil to Hungary “incomprehensible and unacceptable .” He says Hungary has found temporary solutions to stabilize supplies, but they are not suitable for the long term and there must be a “quick solution.”

UNIAN previously wrote that despite unprecedented sanctions from the West, Russia still finances its military machine with revenues from energy exports.

(C)UNIAN 2024